Assume that a hurricane in Brazil destroys half of the coffee crop. Considering that Brazil is a major coffee producing country, consumers expect the price of coffee to increase in the near future. How does this reflect on the demand for coffee?
a. There is a movement upward along the demand curve for coffee.
b. The demand curve for coffee shifts inward.
c. The demand curve for coffee shifts outward.
d. There is a movement downward along the demand curve for coffee.
e. The demand for coffee declines.
QUESTION 2The Public Choice school of economists argue that:
a. the invisible hand of the market is inefficient in allocating resources to their best uses.
b. the government often does not take correct economic decisions as it is run by self-interested politicians.
c. the government takes correct decisions as it is run by conscious and educated individuals.
d. the market fails to maximize social efficiency.
e. the government is a non-profit making organization which works to maximize social efficiency.
QUESTION 3Other things remaining the same, if a large part of the population decided against having soda for health reasons, there would be a(n):
a. increase in the quantity of soda supplied.
b. increase in the quantity supplied of complements like fries and burgers.
c. decrease in the price of soda.
d. rightward shift of the demand curve for soda.
e. decrease in the quantity demanded of substitutes like mineral water.
QUESTION 4The Austrian school of economists stressed on the efficiency of the markets on the pretext that:
a. resources could be efficiently allocated through price system and free markets.
b. governmental intervention was necessary for the efficient allocation of resources.
c. the price charged under the free market system was always lower than under central planning.
d. the market had never failed earlier.
e. the market did not suffer from imperfect information.
QUESTION 5Other things remaining unchanged, which of the following is most likely to cause an increase in the demand for personal computers?
a. A reduction in the price of personal computers
b. An increase in the supply of personal computers
c. An increase in the cost of computer printing ink
d. An increase in the number of computer manufacturers
e. A requirement by universities that all students buy personal computers
QUESTION 6The existence of network externalities implies that:
a. the value of a network falls as the number of members rises.
b. the opportunity cost of switching networks is higher for larger networks.
c. smaller networks are more successful than larger ones.
d. newer networks are more likely to become locked in.
e. only the most efficient and superior technology prevails in the market.
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